Recently one of my subscribers emailed me a few charts for review. This particular trader wanted to know which stocks I would trade of the handful that he inquired about. I told him that although each of the stocks looked good in the short term, I didn’t like them all for trades.
Even if you have no personality, make sure you understand your stock's personality!
One thing I always try to consider when scanning stocks for chart patterns [1] is to take a longer term look at the chart to review that stock’s trading history and personality. Is it prone to gaps? Does it seem to trend well? Does it follow through and make continuation moves or does it reverse out of nowhere? While a stock might have a very clean bull flag pattern [2] or double top [3] in place, it may have a history of ignoring such developments. Looking at factors like that helps me to decide if I think the most recent pattern is likely to develop into a good trade or not. Some stocks will set up good patterns but just might not have a history of really confirming them well, which will cause me to move on to the next setup on my list.
Chart reading isn’t a crystal ball, but it can sure give us a glimpse of how a stock usually moves. Taking a stock’s personality into account when contemplating a trade can sure help us determine more accurately how it may behave going forward. In the end, good trading is all about putting the best odds for success on our side, so trade the stocks with consistent personalities!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com [4]
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